Pimco's McCulley: 'Co-Invest' With Government

The state of the nation’s banking system continues to weigh heavily on the markets, and Paul McCulley, managing director of Pimco, weighs in on this and more.

McCulley on Bank "Nationalization"

“With the top banks we’re not talking about nationalization, we’re talking about public-private partnership that we’re going to be putting capital in…I think the constant repetition of the n-word over the last couple weeks before Ben (Bernanke) spoke hasn’t been helpful, and I think the rally yesterday was really was related to the clarification Ben was bringing to the issue.”

McCulley: Banking System Has Always Been "Joint Venture"

“The American people, people in any country, want to have deposits that are guaranteed to trade at par, and we have that with the FDIC, which came in obviously in 1933, a wonderful program, and we also have the discount window, so the American people know they can get their money, because either they get it from the FDIC if their bank goes bust or they get it because the bank can go to the Fed and get cash against collateral, so it’s always been a joint venture.”

McCulley: Invest Like the Government

“Shake hands with the government. Capitalism is in the intensive care ward, and government is there as the attending physician, and we’re seeing asset class after asset class be supported by the government, and we want to be a co-investor with the government, so that would be your overall theme...You want to shadow what the government is doing."

More news from CNBC.com: